May 02, 2014

How to lose £billions

Uncorrected Transcript

Public Administration Committee

Accountability of Quangos and Public Bodies

Tuesday 29 April 2014

Professor Chris Skelcher, Dr Katherine Tonkiss and Tom Gash

Q1 Paul Flynn: Are we dabbling around in the shallows chasing minnows while the fat salmon swim by unhindered? You did not seem to be excited by the mention of the Nuclear Decommissioning Authority and their supervision of Nuclear Management Partners. On one contract, the price went up from £387 million to £729 million. Another contract that was due to be completed in three years’ time has been delayed until 2023. The costs have gone up to £70 billion, and are likely to go up to £93 billion. Is this not a matter that you should be excited and stirred about, when this firm, Nuclear Management Partners—an American firm—has just been given a new contract after five years of grotesque incompetence and waste of public money? This cancels out all the savings made elsewhere. If you take all the rest of the efficiency savings, then look at the Nuclear Decommissioning Authority clearing up the nuclear mess from the past, they are likely to end up with a bill of £93 billion. They are grossly inefficient, as one of our sister Committees recently concluded.

Professor Skelcher: Unfortunately, it is one of the 600 or so public bodies that I have not really had much contact with, but I do take your point.

Q2 Paul Flynn: Has your life not been wasted then? Can I give you a little example? It came before the Public Accounts Committee, but it is an example of accountability. The Nuclear Decommissioning Authority contracted KPMG to have a look at the work of Nuclear Management Partners, and they sent a report to our sister Committee that was heavily redacted. It is reasonable to take out the names of people in them, but they took out complaints about the quality of management, complaints about the fact that they had not completed their contract, and all the fundamental criticisms of the body were redacted from one of our Committees. Is this not an atrocious example of lack of accountability?

Professor Skelcher: It seems to me that the particular example you are citing there—obviously, a very important example—illustrates the general problem of the way in which Government operates at the moment, which is that it does operate through a whole series of arm’s‑length relationships. We allocate functions to public bodies, which then have contracts with other organisations, but the issue of transparency there is also important. If we just look at non‑departmental public bodies as a group, they do have quite a high level of transparency, in the sense of their reporting. But if we look at other kinds of arm’s‑length relationships, including arm’s‑length contract relationships, those are quite often commercially confidential, and we do not have the same level of transparency about the performance of bodies. I think that comes back to the issue about needing to look across the whole landscape of Government, and to have a common set of principles about transparency and accountability that apply not just to public bodies but also to these other kinds of contractual and arm’s‑length relationships.

Q3 Paul Flynn: Is it not telling that the two details that excited public interest, and possibly made the Today programme, were not these sums of tens of billions that have been thrown away, but the fact that in their accounts, there was a receipt for a taxi journey for a cat and large bills for attending a golf tournament in America? These minute sums are fascinating to the public, and seized on and endlessly debated, but the mega‑sums—tens of billions—are ignored.

Tom Gash: The point here, of course, is that what is needed is for the Department to have an understanding of what good performance looks like for the Nuclear Decommissioning Agency and whether that is being achieved or not, and there is a very simple step. I would like to repeat the evidence that Lord Heseltine gave when talking about the closure of the Audit Commission: he was asked, “What on earth do you do if you are not happy with the performance of the organisation?” and he said, “Fire the Chair. It is no more complicated than that.” Accountability mechanisms exist currently that can be used or not used, depending on the proficiency of the Department in setting clear expectations of what good performance looks like and managing performance in that way. Obviously, firing is an extreme step, but it is one that is possible if you have gathered enough evidence around performance.

Q4 Paul Flynn: The three measures for assessing the value of these bodies by the Government are technical proficiency, political impartiality, and independence from Government. Has that worked?

Professor Skelcher: In general, that has been a useful set of criteria, and that has certainly informed some of the decisions that were made, but, as your Committee investigated back in 2010-11, there was also a concern that those kinds of criteria were not necessarily the ones that justified the retention or abolition of individual bodies.

Q5 Paul Flynn: One of the difficulties that certain public bodies have had with their independence is that they are still limited by the Treasury rules. The Intellectual Property Office could probably go into the public sector and very efficiently and profitably do work that is done by trademark agents and various other agencies—patent agents, as well—but they are hidebound by Treasury rules. They are allowed to outsource jobs, but they are forbidden to insource jobs, in spite of the fact that it might well be to the public good. Is this is something that you would welcome: to see them, if they are free‑standing and liberated, free to engage in an entrepreneurial way in public enterprises?

Professor Skelcher: A number of such bodies do operate on that kind of trading‑account basis, but there is no doubt that there is a tension between that and the general public expenditure climate at the moment. Treasury financial controls are increasing on public bodies.

Dr Tonkiss: Absolutely. This is a really interesting tension between the rationale for having a body at arm’s length and the process of Treasury control, which is, as you suggest, limiting how much flexibility you have in deciding how to insource particular services. Our own research in this area has really shown how there is concern amongst Chairs of public bodies that they see part of their role to be innovating with less resources at the moment, and that this controls framework is perhaps reducing their capacity to do so.

Q6 Paul Flynn: When the happy day dawns next year and we bury this Government under a large slab, never to be resurrected from its dishonoured grave, how would you summarise their achievements or otherwise, or their failures, in this area in their five years of Government?

Tom Gash: Like any assessment of performance, it needs a benchmark, and you would not look at what has happened over the past years and say it was any worse than what had gone before it. In many senses, you would say that this is a Government that cares more about the effectiveness of these bodies. We still await the full evaluation of the term, and it will take a little while to play through. Some savings have been accounted for by the NAO, and that is welcome in the context of what the Government is trying to do. On effectiveness, there are lots of questions to be answered, and your example of the Nuclear Decommissioning Agency is a strong one, in the sense that it does bring into attention where the efficiency and the effectiveness gains are actually to be found: it is in very effective between Government Departments and large, big‑spending, high‑impact‑on‑the‑public organisations. That is the area where there has been less evaluation of whether what has happened has worked. We are doing a little of that now, but it is also the most important area.

Q7 Paul Flynn: Not any worse. Other witnesses, what are the failures or the successes?

Professor Skelcher: The success is that the governance and accountability of public bodies has been taken much more seriously than has been the case to date. The weaknesses are about the kinds of reforms that have been undertaken, and the extent to which the involvement of stakeholders in advisory bodies has, in some areas, been reduced. In some cases, those advisory bodies are now less transparent than they were previously. If there is one agenda for the future that I would add on, it is about ensuring that the beneficiaries of services and activities delivered by public bodies actually have some voice in the process of decision‑making in those bodies—that we move away from a model that sees public bodies as a kind of quasi‑business with policies decided by the board into something where there is a greater involvement of users, beneficiaries or consumers of those services in consultation and decision‑making.

Dr Tonkiss: We keep coming back to the point about the governance of public bodies, the routine oversight by Departments, and one of the strengths of the approach that has been taken is that that the profile of that routine oversight has really increased. That has been really valuable, and there has been a commitment to try to upskill those that are responsible for that routine oversight. That is really important, but this is not being contextualised within some of the issues that exist around capacity, which mean that some Departments struggle to maintain oversight, particularly with the added responsibilities of the controls framework and the triennial reviews, as well, which often fall on quite similar people. In that area, there are two sides.